I. Introduction
Are you interested in stock market investment? Then you must begin by learning about the basics. And what is more basic than the idea of a stock exchange. In this article, we cover the different types of stock exchanges, lists of stock exchanges in India, and more.
A. An overview of stock exchanges in India
The stock exchange is an important component of the stock market. It plays a vital role in the stock market that allows traders to trade various financial instruments, including bonds, shares, stocks, etc., listed on the exchange index. There are many stock exchanges currently active in India. Among them, two major names include National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
B. Importance of stock exchanges for the Indian economy
The stock exchange plays a significant role in the Indian economy. It plays a vital role in the country’s economy as it helps companies raise funds for their business such as expansion, new ventures, customer experience enhancement, etc., that ultimately contribute to companies’ economic growth leading to the country’s economic growth. Also, it helps to collect funds from local investors reducing the external economic burden of the country.
II. What is a stock exchange?
Whether you are an investor or a company willing to participate in the stock exchange, you must begin with the basics. So, before we move forward to discuss stock exchange types, functions or regulations, let’s learn about the concept of a stock exchange briefly.
A. Definition and function
A stock exchange is a regulated marketplace where buyers and sellers trade stocks, bonds, and other securities. It provides a platform for companies to raise capital by issuing shares, ensures price transparency, liquidity, and fair trading practices, and enables investors to buy, sell or hold financial assets efficiently and securely.
B. Role in financial markets
The stock exchange plays a vital role in the financial market. It helps companies raise funds by offering company shares to investors. This plays a crucial role in creating a co-dependent economy or financial system that requires low to no external financial support.
C. Historical context
In the 19th century, India’s biggest stock exchange, the Bombay Stock Exchange or BSE, was established as India’s first formal stock exchange. In the late 20th century, the stock market of the country witnessed major transformative changes along with the inception of the NSE, or National Stock Exchange.
Read More: Top Undervalued Stocks in India for 2025
III. Major stock exchanges in India
There are many stock exchanges currently active in India. Below we will discuss some major ones in detail.
A. National Stock Exchange (NSE)
One of the major stock exchanges in India is the National Stock Exchange or NSE.
1. Overview and history
NSE or national stock exchange was established in 1992. It was the second oldest stock exchange after BSE. The market capitalization of NSE is ₹448.42 Cr as of 7 October 2024.
2. Key functions and indices
NSE has several important indices such as
● Nifty 50
● Nifty Financial Services
● Nifty Bank
● Nifty Midcap Select
● Nifty Next 50
Its key functions are:
● Establishing trade for equity, debt, and other securities accessible from investors worldwide
● Acting as a common network offering investors equal opportunity to participate in trade
● Meeting global financial exchange market standards
B. Bombay Stock Exchange (BSE)
Bombay Stock Exchange or BSE is the oldest stock exchange in India.
1. Overview and History
Bombay Stock Exchange was established around 1875. This is the world’s 10th largest stock exchange and one of the oldest stock exchanges in Asia.
2. Key functions and indices
BSE or Bombay Stock Exchange indices include:
● BSE Sensex
● BSE Sensex 50
● BSE BANKEX
● BSE Bharat 22
● BSE 100
Its key functions are:
● Facilitating trade of various financial instruments
● Being responsible for clearing and settling trades
● Disseminating market data and investor education.
C. Multi Commodity Exchange (MCX)
Another major stock exchange in India is MCX or Multi Commodity Exchange.
1. Overview and history
Multi Commodity Exchange was established in 2003 and is currently based in Mumbai. It is India’s largest commodity derivatives exchange and has an average turnover of ₹32,424 Cr. with an increase rate of 26%.
2. Key functions and commodities traded
MCX’s key functions include:
● Trading commodity derivatives
● Offering a platform to trade commodities for commodity investors across the nation
● Offering equal opportunity for every commodity trader to make a profit from commodity derivatives
Commodities traded:
● Agricultural commodities
● Metals
● Energy
D. National Commodity & Derivatives Exchange (NCDEX)
Lastly, the National Commodity & Derivatives Exchange, or NCDEX, is also a major stock exchange in India.
1. Overview and History
NCDEX was incorporated on 23 April 2003 and began its operation as a public limited company on 15 December 2003.
2. Key functions and commodities traded
NCDEX’s key functions are:
● Assisting Indian farmers in the price discovery process
● Working as a commission agent previously, it controlled a lot of market information
● Providing daily price signals
Its commodities traded include:
● Guar
● Pulses
● Spices
● Soyabean
● And more.
Read More: Best Sugar Stocks to Buy in India in 2025
IV. Types of stock exchanges in India
There are three types of stock exchanges that exist: equity, commodities and derivatives.
A. Equity exchanges
Equity exchanges are marketplaces where stocks and other securities are bought and sold. They provide a platform for companies to raise capital by issuing shares to the public. Major exchanges enable price discovery, liquidity, and transparency, facilitating efficient trading for investors globally.
1. Functions and types of equities traded
The types of equity trade on such exchanges are:
● Common Equity
● Preferred Equity
● Exchange-traded funds
The functions of such exchanges include:
● Facilitating equity trades
● Offering Equity market information
● Investor Education
B. Commodity exchanges
Another popular type of stock exchange is commodity exchange.
1. Functions and types of commodities traded
The functions of such exchanges are:
● Trading various types of commodities
● Providing a common communication trading network for commodity investors
Commodities traded on such exchanges include:
● Cotton
● Oil
● Crude oil
● Wheat
● Oranges
● Uranium
● And more
C. Derivatives exchanges
Derivative exchange is the last type of stock exchange in India.
1. Functions and types of derivatives traded
The functions of such exchanges are:
● Facilitating derivative sell and purchase (trade) for derivative investors
● Creating a common platform for all derivative investors
The types of derivatives traded include:
● Future derivatives
● Swaps
● Forwards
● Options
V. Functions of stock exchanges
Stock exchanges have their own functions. In this section, we discuss the main ones.
A. Facilitating trade
The first and most important function of the stock exchange is to facilitate trade. The stock exchange is responsible for facilitating all kinds of trade including equity, commodities, and derivatives.
B. Price discovery
Apart from facilitating trades, stock markets are also responsible for executing the price discovery process. It assists institutional investors as well as independent investors in the price discovery process.
C. Providing liquidity
Providing liquidity is a key function of exchanges, enabling easy buying and selling of securities. It ensures that investors can quickly trade assets without significantly affecting their market prices.
D. Ensuring transparency and regulation
Exchanges ensure transparency and regulation by enforcing rules, monitoring trades, and providing clear information on prices and volumes. This fosters trust, prevents fraud, and promotes fair, orderly markets for investors and companies.
VI. How stock exchanges operate
Knowing about the types of stock exchanges is not enough. You must also learn about how they operate.
A. Trading mechanisms
The trading mechanisms of exchanges include auction-based and electronic systems. In auction-based trading, buyers and sellers meet at specific times to determine prices. Electronic trading automates this process, allowing continuous buying and selling through matching algorithms. Both mechanisms ensure liquidity, transparency, and efficient price discovery for investors and traders.
B. Clearing and settlement
The stock exchange is not only about executing trades. It also works to clear and settle trade claims and dividend payout associated with the trade. Clearing and settlement in exchanges ensure the smooth completion of trades. Clearing involves validating and matching buy/sell orders, while settlement finalizes the transfer of securities and funds between parties. This process minimizes counterparty risk, ensuring trades are accurately executed and financial obligations are fulfilled within a specified timeframe.
C. Role of brokers and market participants
In the stock exchange, both brokers and market participants have their pre-determined roles and responsibilities according to the rules of the Securities and Exchange Board of India or SEBI. More on this below.
VII. Regulatory framework
As we have already learned, the stock exchanges of India follow the rules and regulations of SEBI. Now we will learn about the regulatory framework of stock exchanges in detail.
A. Role of the Securities and Exchange Board of India (SEBI)
SEBI plays a vital role in the Indian financial system including stock exchanges. It does this by regulating the securities markets, safeguarding investors’ interests and ensuring transparency in trades.
B. Key regulations and compliance requirements
Different stock exchanges have their own rules and regulations determined by SEBI, and they can vary from one another. However, the key regulations and compliance requirements for Indian stock exchanges include:
● SEBI or Securities and Exchange Board of India Act, 1992.
● The Companies Act, 2013.
● The Securities Contracts (Regulations) Act or SACRA, 1956.
VIII. Future trends and developments
The stock exchanges in India display several future trends that will fuel the future growth of this industry.
A. Technological advancements
Technological advancements are transforming stock exchanges, driving faster, more efficient trading through automation, AI and blockchain. These innovations reduce transaction costs, enhance transparency and improve liquidity. High-frequency trading and algorithmic strategies are reshaping markets, while digital assets like cryptos introduce new trading opportunities. As technology evolves, stock exchanges continue to adapt, enhancing security and expanding global reach.
B. Emerging market trends
Emerging market trends like the rise of digital assets, sustainable investing and decentralized finance (DeFi) are reshaping the future of stock exchanges. Cryptos and tokenized assets challenge traditional structures, while ESG (Environmental, Social, Governance) investing pushes exchanges toward sustainability. Additionally, increased retail investor participation, driven by digital platforms, diversifies market dynamics, making stock exchanges more inclusive and globally interconnected.
C. Impact of globalization
Lastly, the impact of globalization is also one of the primary feature trends that will boost the growth of stock exchanges in India in the upcoming years. Globalization has broadened the reach of stock exchanges, facilitating cross-border investments and increasing market liquidity. It enables companies to access global capital, diversifies investor portfolios, and heightens competition among exchanges. However, it also exposes markets to international economic shifts, amplifying the effects of geopolitical and financial events worldwide.
IX. Conclusion
A stock exchange is a platform that facilitates trades of various financial instruments. It plays a vital role in a country’s economic growth and has its unique functions and regulations. Its future trends include emerging market trends, the impact of globalization, and technological advancements.
Technological advancements and changing market trends are most likely to play a crucial role in the growth of the Indian stock market. Also, the impact of globalization will be another important fuel in this country’s stock exchange growth.
FAQs
1. What are the functions of the stock exchange in India?
Stock exchange in India functions as a market for trading bonds, stocks, and equities. It also helps to determine the marketability and prices of securities.
2. What are the types of stock exchanges in India?
A. Primarily, there are three types of stock exchanges in India derivative exchanges, equity exchanges, and commodity exchanges.
3. What is a stock exchange and its types?
A stock exchange is a financial market where stocks, bonds, and other such securities are traded. Derivatives, equity,y and commodities are some types of stock exchanges in India.
4. What are the four functions of the stock exchange?
The primary four functions of the stock exchange in India include: facilitating the trade of securities, evaluating the marketability and prices of stocks, ensuring safety and transparency in trading, and offering liquidity.
